Harambee deposit taking sacco has written off its entire investment in the Kenya Union of Savings and Credit Co-operatives (Kuscco) valued at Ksh184 million ($1.42 million) to clean up its books as it eyes to mobilise up to Ksh4 billion ($31 million) of additional share capital to enhance its resilience.

The country’s fourth largest sacco by assets Ksh38 billion, ($294.57 million) which is recovering from the financial bruises inflicted by mismanagement and governance challenges by former directors, says the non- refundable share capital is a ‘safe’ cushion for the society compared to members’ deposits.

The saccos board has entered into a deal with its members to inject an extra Ksh4 billion ($31 million) in the business in return for dividends on share capital at the rate of 15 percent every year for a period of five years (2024-2028).

Under the plan which has been approved by Sacco Societies Regulatory Authority (SASRA) Harambee sacco will grow its share capital to at least Ksh6 billion ($46.51 million) in 2028 from Ksh2.4 billion ($18.6 million) last year and match its reserves with the same amount pushing the reserves to Ksh10 billion ($77.51 million) from Ksh4 billion($31 million) in the same period.

The extra funding is expected to help the sacco strengthen its capital adequacy ratios and boost its lending capacity.“We are targeting Ksh4 billion ($31 million) in that period of five years and then we will slow down because it is a very costly source of capital. You know once you have given a promise of 15 percent you can’t go down. So our target is to push our share capital to at least Ksh6 billion and that will put us at a level where we have got some stable source of capital to lend out ,” George Ochiri, the society’s chief executive told The EastAfrican in an interview last week.“The challenge with deposits is that any day a member can choose to walk away and they will ask you to return their deposits. With share capital by law we are covered because it is permanent financing in the organisation. So till the law changes it is a very safe source of capital to run a business or to run a Sacco.”The capitalising raising started last year (2024) with the Sacco mobilizing about Ksh900 million ($6.97 million) of fresh capital from its members following the approval of the plan by the regulator—Sacco Societies Regulatory Authority (SASRA).“We were selling this concept of members investing in share capital in a manner that if we pay you 15 percent for five years by the end of the fifth year you will have almost recouped your entire original investment,” says Mr. Ochiri.“So along that period we also expect to grow our reserves to match the same Ksh6 billion ($46.51 million) or more so that the impact of dividends on share capital is neutralized. So reserves should grow and share capital should grow so that you meet that ratio of core capital which should be at least 10 percent of the total assets.”Harambee Sacco has consistently paid out dividends on share capital and interest on deposits in the last four years signaling a major turnaround of the society catapulted by a Ksh4 billion ($31 million) facility from Co-operative bank in 2022.

Its dividends on share capital has increased by a higher percentage in the last four years from eight percent in 2021 to 15 percent in 2024 while interest on deposits has increased from seven percent to nine percent in the same period.

Last year (2024) the Sacco’s net earnings grew by 21.66 percent to Ksh1.46 billion from Ksh1.2 billion in 2023 while total revenue grew by 23 percent to Ksh7.01 billion($54.34 million) from Ksh5.7 billion($44.18 million) in the same period.

Total assets increased by five percent to Ksh38.6 billion($299.22 million) from Ksh36.7 billion($284.49 million) while loan book expanded by 10 percent to Ksh32 billion($248.06 million) from Ksh29.1 billion($225.58 million).

Its core capital increased by 23.52 percent to Ksh6.3 billion ($48.83 million) from Ksh5.1 billion ($39.53 million).

Harambee Sacco embarked on a transformation journey in the year 2019 with a viewing to reclaiming its glory in the Sacco sector battered by years of mismanagement and embezzlement of funds.“When we were starting this journey to transform Harambee to be what it should be we started by appreciating that we had lost our glory and we had to accept and list down what are these that we lost Of course image, of course financial performance , confidence of membership and performance of the staff. So we went on and gradually we have been improving in terms of financial returns, “says Ochiri.“In 2021 our philosophy was strengthening our processes and that was also the peak of Covid-19 so we invested quite a bit in technology and we moved most of our services onto the mobile internet platform.”Ochiri says the difficult operating environment characterized by increased taxes and several statutory deductions has adversely impacted the Saccos operations.“Last year it was quite a challenge most of our members the pay slips are very tight. So when the government introduced those very many deductions some to do with National Social Security Fund (NSSF), Social Health Authority (SHA), increase in tax rates, PAYE increase, even tax on allowances went up,” he says“Now you find we are in a situation where members’ uptake is highly moderated. They would have taken more but they can’t. The room in the pay slip is too tight. So you find we are doing business largely on top ups meaning that our potential of growth is so huge but we can’t attain it because of the many deductions that were introduced. There also no increase in salaries and the other bit that has slowed us is very few new employees. That has significantly affected our funds mobilisation. It is true we are feeling the heat.”The Sacco disclosed that it had invested Ksh184 million ($1.42 million) in Kuscco in the form of share capital which it has written off the entire amount.“Yes it is true we had money in Kuscco but what we had was share capital. We were one of the original investors in Kuscco, in fact one of the oldest so all over the period we accumulated Ksh184 million ($1.42 million) in shareholding,” says Ochiri.“We didn’t have money invested in the special deposits. So this Ksh184 million with the advice of our auditors and of course guidance by the regulator we wrote if off the entire amount. “

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